The Growth Report: the momentum of Africa
Developing countries can achieve fast, sustained, equitable growth if they engage and integrate with the global economy and have committed leaders. This is the key message of the recently published ‘Growth Report', a study put together by a group of policy makers and economists, mostly from developing countries.2 The group was commissioned to investigate what is required for sustained and inclusive growth in order to identify practical implications for policy makers.
"At a time when industrialised countries are experiencing a sharp slowdown in growth, many of the world's poorest countries have found growth to be elusive. It is our belief, however, that sustained, high growth can be explained and repeated," said the Chair of the Commission, Michael Spence.
According to the report, fast sustained growth for developing countries is attainable with the right mix of "policy ingredients." Commercial activity alone will not produce the kind of growth that will lift developing countries out of poverty. Government intervention in the economy and some degree of protectionism will also be needed.
The experience of high-growth economies
The report looks at the 13 economies that have grown by at least 7% a year for 25 years or longer since 1950.3 Despite much heterogeneity, these countries have some common characteristics that should help policy makers formulate a growth strategy: each exploited the opportunities presented by the world economy, upheld high rates of saving and investment, maintained macroeconomic stability, allowed markets to allocate resources and had governments that were competent, dedicated and reliable.
Integration with the global economy is a key requirement for growth. This has allowed developing countries to import ideas, technologies and knowhow from the rest of the world, especially through foreign direct investment and education.
The challenge for Africa
According to the report, Sub-Saharan Africa is enjoying its fastest growth for decades: 6% a year since the mid-1990s. New leaders have created more accountable governments, better economic policies and higher prices for commodity exports. The challenge for the region will be to turn these favourable circumstances into lasting progress, based on rapid job growth and a more diverse economy. Ideally, it would "use the fruits of the commodities boom to reduce the region's dependency on those commodities." This will require strategies for global economic integration and policies to identify those products that will help Africa create comparative advantages, increasing productivity and stimulating growth. It will also be very important to increase both domestic and foreign investment, mainly in infrastructure.
But the report also calls on richer countries to play a part in encouraging growth, offering time-bound trade preferences to help Africa overcome being "late starters." Advanced economies must help development by ending their current focus on energy subsidies, biofuels and protectionist policies.
It will take time to create the conditions to sustain growth. But African leaders should take advantage of the favourable momentum and find the right path. "Growth is not an end in itself. It is instead a means to several ends that matter profoundly to individuals and societies. Growth is, above all, the surest way to free a society from poverty."
1 Paolo Ghisu is a member of the EPA and Regionalism team with ICTSD.
2 See the Commission on Growth and Development's report: The Growth Report: Strategies for Sustained Growth and Inclusive Development, May 21 2008, www.growthcommission.org
3 The 13 countries concerned are: Botswana, Brazil, China, Hong Kong, Indonesia, Japan, the Republic of Korea, Malaysia, Malta, Oman, Singapore, Taiwan and Thailand.